The auditing firm of Cobain, Novaselic, and Grohl is auditing ABC Company's proposed financials for the...

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The auditing firm of Cobain, Novaselic, and Grohl is auditing ABC Company's proposed financials for the 20XX fiscal year and is reviewing the company's reported value of inventory. The auditing firm wants to determine what value of ending inventory ABC Company should be reporting according to the gross profit method. The information below is pertinent to preparing a "mock" income statement for ABC Company using the gross profit method. Historical Gross Profit % Book Value of Beginning Inventory Total Purchases During Period Book Value of Sales Revenue Sales Revenue Cost of Sales: a partial income statement based upon the above information to determine what the company's ending inventory should be according to the gross profit method. 30.0% $ 1,600,000 $ 5,800,000 8,000,000 $ Beginning Inventory Purchases Cost of Goods Available Ending Inventory Cost of Goods Sold Gross Profit Part One ABC Company Income Statement (Partial) Year Ended December 31, 20xx Part Two On the firm's proposed balance sheet, ABC Company is attempting to report that it has $2,500,000 worth of merchandise inventory on hand. In roughly a paragraph, express how the auditors at Cobain, Novaselic, and Grohl should feel about this number, and what you think they should do (if anything) to attempt to validate the amount of inventory ABC Company is attempting to report. The auditing firm of Cobain, Novaselic, and Grohl is auditing ABC Company's proposed financials for the 20XX fiscal year and is reviewing the company's reported value of inventory. The auditing firm wants to determine what value of ending inventory ABC Company should be reporting according to the gross profit method. The information below is pertinent to preparing a "mock" income statement for ABC Company using the gross profit method. Historical Gross Profit % Book Value of Beginning Inventory Total Purchases During Period Book Value of Sales Revenue Sales Revenue Cost of Sales: a partial income statement based upon the above information to determine what the company's ending inventory should be according to the gross profit method. 30.0% $ 1,600,000 $ 5,800,000 8,000,000 $ Beginning Inventory Purchases Cost of Goods Available Ending Inventory Cost of Goods Sold Gross Profit Part One ABC Company Income Statement (Partial) Year Ended December 31, 20xx Part Two On the firm's proposed balance sheet, ABC Company is attempting to report that it has $2,500,000 worth of merchandise inventory on hand. In roughly a paragraph, express how the auditors at Cobain, Novaselic, and Grohl should feel about this number, and what you think they should do (if anything) to attempt to validate the amount of inventory ABC Company is attempting to report.

Answer rating: 100% (QA)

Part One Using the gross profit method we can determine the cost of goods sold and then subtract tha... View the full answer